As of 2018, there were 30.2 million small businesses in the Unites States, 78 percent of those reporting profits; yet, only 80 percent of those will remain in business longer than a year, and only half will make it more than five years. Those that do survive likely get some type of small business financing.
Eighty-two percent of those that fail will do so because of cash flow problems. In fact, 30 percent of small businesses fail because they run out of money. It’s difficult to justify these statistics when you consider that 25 percent of them will use no outside financing at all.
When we look at small business financing in today’s market, we see many of the same sources that we’ve seen in the past:
- Bank loans
- SBA loans
- Personal cash reserves
- Angel funding
Still, one out of every four small business owners won’t seek any funding at all, even though 30 percent of all small businesses fail because they run out of money. It can’t be a mere coincidence that those two percentages are so similar.
How Small Business Financing Keeps Businesses Alive
If these businesses are failing due to lack of capital, then why aren’t the owners getting the funds to stay in business? Could it be that the traditional means by which small business are financed don’t fit everyone? Let’s look at those categories listed above in better light.
- Big banks approve fewer than 30 percent of all loan applications.
- Of the top ten rated SBA providers, only two even consider businesses with less than $8,000 in monthly revenue, a fact that doesn’t bode well when we consider that roughly two-thirds of all small businesses start with less than $10,000.
- The business owners don’t have the cash reserves, which would make the funding unnecessary.
- Nor do they know the angel investors or the crowds to source to come up with the capital.
Your small business has a greater chance succeeding if you have access to the capital you need, which might not be available through more traditional channels. If such is the case, a merchant cash advance could be what you’re looking for. A cash advance isn’t subject to some of the hurdles that traditional lenders might put between you and the money you need to fund your business.
Credit scores are not a factor
A cash advance is repaid through a percentage of each day’s receivables, so personal and business credit scores aren’t a factor.
No collateral required
All the collateral you need is the proof that you can do business, have done business, and will continue to do business. Again, the advance is based on your receivables and paid back by a percentage of future sales.
No lengthy waiting periods
Bank and SBA loans have lengthy application processes, and it can take up to three months to get the money. Merchant cash advances are also called same day cash advances; the application process is easy, and the money is almost always available within 48 hours.
Too many American small businesses are failing because of a lack of funding, especially since the funding is available in many of those situations. Merchant cash advances will play an important role in the future of small business financing, and they will save many small businesses that would otherwise fail.